Korean brokerages suffer earnings shocks in 1st half of 2022 amid rate hikes

Dealers at Hana Bank work at its headquarters in Seoul, Aug. 12. Yonhap

By Lee Min-yung

Earnings at major securities firms here appear to have plummeted in the first half of this year, as steep rate hikes and fears of an economic downturn deterred the influx of capital into the local stock market.

Korea's top 10 brokerages, including Mirae Asset Securities, Korea Investment & Securities and Samsung Securities, are estimated to have chalked up a combined net profit of 2.68 trillion won ($2.05 billion) between January and June, down 42.4 percent from a year ago, according to industry data.

Most of them suffered drastic earnings falls due to a drop in their stock trading commission profits. The uncertain financial outlook here and abroad froze market sentiment. The daily transaction volume in the local stock market reached 18.47 trillion won in the first half of 2022, down 38.7 percent from a year earlier.

The benchmark KOSPI soared to a historic high of more than 3,300 points in June of last year, fueled by post-pandemic market liquidity. But with the U.S. Fed and the Bank of Korea taking aggressive steps for monetary tightening from March, the main bourse tumbled to below 2,400 points until recently.

NH Investment & Securities was among the major securities firms hit hardest by the earnings fall in the second quarter. The company reported an operating profit of 154.2 billion during the same period, down 60.8 percent from a year ago.

But market analysts said securities firms should see earnings shocks weaken in the second half, as shown by the recent stock market rebound.

“Korean stocks are showing signs of a rebound on a recent buying spree by foreign investors,” Yuanta Securities analyst Kang Dae-seok said. “The KOSPI achieved a recovery to 2,523 points as of the market's close on Aug. 11, and this is a rise of 10.9 percent from a low seen early last month.”

The Korean stock market will be considered by many foreign investors as an attractive investment area, as the won-dollar exchange rate is showing signs of stabilizing, according to the analyst. The U.S. dollar gained ground against the Korean won, with the exchange rate hitting this year's new high of more than 1,320 last month. But it has since declined to around 1,300 won per dollar.